Skip to main content

tv   Market Makers  Bloomberg  June 23, 2014 10:00am-12:01pm EDT

10:00 am
>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. business waits on the supreme court. a week left in the term and justices have crucial cases. versus tvm is aereo networks. >> ousted american apparel ceo says the company's board is acting illegally, trying to be reinstated. >> the tie that feels like a to usaortugal's stun with a final goal. what are the odds of america making it to the next round of the world cup? it is monday, hi, everybody.
10:01 am
welcome to "market makers," i erik schatzker. >> i am e stephanie ruhle, great to be back. too, i had some great times last week. alix steel sat in your chair. >> almost as amazing as kanye west. sitting next to me last week. it is a new week, let's kick it off. a busy news morning. breaking economic news, existing home sales for the month of may are out. who better to break down the numbers then michael mckee. what is the word? whendon't know whether you shopping for good news, existing home sales up more than forecast. 4.9% for the month to a $4.89 million annual sales rate. that is the best so far this year. remember we were talking about how every buddy was buying condos and not single-family
10:02 am
homes, that flip. single-family homes up 5.7%, condos and co-ops unchanged. maybe people coming back into the markets right now. numberting aspects, the of homes for sale, the mother supply falls in may. a little less supply and that has pushed the price of homes up to an all-time high, i have not ,000 is the $213 median price. more people buying houses. the lowest number of distressed sales since they started keeping that record in october 2008. we are no longer just throwing things out there underpriced and trying to get rid of it. this is actual increase and people buying houses because they want to move up. >> thank you so much for giving us the latest. erik? the packed schedule for supreme court. 11 cases to decide before the end of the month. any minute we might hear from
10:03 am
the justices on one or more with big implications to corporate america. yang yang is outside the high court this morning. remind us why they are so important. like to handices out their most controversial and complicated decisions at the very last moment. this year is no different, just one week left before their term is over. not begancases have to trickle out yet, we are awaiting those decisions. there are five that are of particular interest to the business community that i want to look into. as we await the court's decision. the utility air regulatory group versus the epa, questioning whether the environmental protection agency has authority to regulate stationary sources of greenhouse gases such as factories. the obama administration posture just -- the obama ministration's climate policy. forwn for -- the win
10:04 am
halliburton would make it easier for shareholders to group together. huge steaks. we also have the hobby lobby cases. you have the cases that ask profit companies have religious rights and should be able to opt out of the affordable care act contraception rule. the first time the court has taken of the health care law since 2012. noel versus mil recess, the power of appointments and the lowly of the hundreds of rulings involving this panel members stop the case we have talked about the most, abc versus aereo. at stake is the future of the
10:05 am
$24 billion to the broadcast industry. still awaiting that decision. if it does not happen say we have wednesday, thursday and monday of next week. , a nice rundown of the cases that matter to business at the u.s. supreme court. that is yang yang. >> now another story we have been following. the case against bnp paribas. the french bank is close to a deal with the u.s. government over allegations it violated sanctions against iran and sudan . bnp would plead guilty as part of a deal and pay up to $9 billion to settle these charges. the settlement is not officially done yet and still change. besides have a broad agreement in principle. i want to bring in kerry gardner -- keri geiger, who has been following the case for months. the hits keep on coming in terms of fines. $9 billion, the clo is stepping down.
10:06 am
to getcase is going wrapped up. the unlike some of other banks, is going to feel a lot of pain. they are a smaller bank and they have smaller u.s. operations. here.maller bank >> they are going to use their dollar clearing operations, that could cause customers to go elsewhere. there clo has resigned due to pressure from the new york state sky.ing regulator ben law dozens more are on the chopping block. being we talk about prohibited from conducting business in u.s. dollars will stop has this ever happened before? >> not in a case like this. there have been six other banks in the last few years find for sanctions violations that have not gone to the point where they cannot do dollar bearing in the u.s.. this is a little bit of a new technique on behalf of regulators to try -- >> put some teeth to it.
10:07 am
pressure.the it is difficult to tell if the guilty plea really gets the impact that the regulators and prosecutors want. it does not seems that it deters bad behavior. >> what does this mean for bnp paribas? what i think about the business they do in the u.s., it is not that big. >> there is speculation that if the pressure gets really really having on some of the smaller european banks, they cut off to step out of doing business with the u.s. that's always an option. a $10 billion fine might not be worth it over the type of conduct we are talking about. a lot of banks have gotten in trouble for sanctions, bnp is paying more than we have seen. doi am just looking -- they not generate that much of their
10:08 am
revenue here, but they have a fair number of employees, a quarter of their workforce is in the americas. principally the u.s. throughout latin america as well. >> good point. there are employee issues. and workforce issues that could come into play if the fines or the punishment is too much for them to bear for the u.s. operation. >> the one thing i think about with bnp, we have covered this in previous conversations, every time we seem to talk about this bank or the next bank, we are talking about not an upgrade, a kinds of penalties. once upon a time it was a monetary settlement. then a monetary settlement and plead guilty. now it is money plus guilty plea plus you cannot do business in u.s. dollars. what is next? >> good point. what, nation of fines, -- what firingtion of fines,
10:09 am
people, getting individuals will make people happy and deter wrongdoing. congress was not happy about the way the banks are being punished. what is going to make them happy? mainstream wants to see things punished -- >> they don't know why. >> is last couple cases have nothing to do with the financial crisis. it is a really complex formula that we have not really seen come up. the credit suisse deal, they got a lot of criticism because the guilty plea did not seem to have an impact on the bank. >> you know who i think is pleased? the coo who has been forced to step down, gets to walk out with his stock. summer is here, he no longer has the bnp headache. positive for him. a great? -- agreed? >> in a perverse way. >> keri giving us the latest on bnp. makers," up on "market
10:10 am
plenty of m&a activity. private equity, where is a? on the sidelines. >> i'm not crying for pe. paradise. in what puerto rico is doing to attract investors. this is "market makers" on liver television. streaming on your phone, tablet, bloomberg.com and on amazon fire tv. ♪
10:11 am
10:12 am
10:13 am
watching "market makers," i'm erik schatzker with stephanie ruhle. the biggest year for mergers and acquisitions since the financial crisis. the dealmakers are nowhere to be found. where is private equity? blackstone, carlyle, kkr have raised billions of dollars but they are not spending it. scott is ceo of greenhill and company, one of the biggest independent m&a advisors. where is private equity? onmost are focusing
10:14 am
liquidating the portfolio they have bought. it is a great time to sell assets, ipoing. they have shifted to other areas. kkr and blackstone are active in real estate and hedge funds. >> they've raised a lot of money. they have hundreds of billions of dollars in commitments for private equity deal. partners the limited one? the endowment, pension fund, does it went private equity to be spending the money or is it just as happy -- doesn't believe the money does not need to be spent until the david rubensteins or steve schwarzman's can find something worth buying at the right price? the smart limited partners would rather have them wait until the opportunities are right and values are low and they can really get attractive transactions. sometimes they fall into the trap of wondering why are you investing. the smarter ones realize that if prices are high, wait until they are lower.
10:15 am
>> how have hedge funds worked out for private equity? they were racing to build hedge fund platforms for five years ago. if you look at performance in the fund industry it is not that good. >> we have been in a period where the s&p 500 has done well. you would have done better to put your money in an index fund. people like the lack of volatility of those returns. i think it is great to be a hedge fund manager, i am not sure it is great to be a hedge fund investor. >> if you are a big firm like lack stone, which has more money in alternative assets than any other. carlyle has almost 200 billion dollars. kkr is north of $100 billion. ,hese are enormous institutions their funds are large, too. i hesitate to use the phrase "law of large numbers," that refers to something else.
10:16 am
but you need to do a lot of big deals to put capital to work. >> win the companies went public, their incentives really changed. their incident used to be as big again as you can and collect your 20% upside with interest. as you shift to being a public company, the public markets do not give them credit for interest. they want to grow management fees. inherent conflict of interest between limited partners investing with the general partner, blackstone, and the public shareholders? >> for years, limited partners did not like the opportunity of investing in a fund that did anything out like a broker-dealer. reason many investors have given money to places like blackstone, the bigger they are the more connected they are in more information they have. there's a trade-off and that is somewhat of a conflict of interest. they went to collect management
10:17 am
fees, that is what gets value. >> private equity firms do not seem to be in the m&a space right now, it is just company to company. are they missing the boat? companies like google and massive transactions, should we start to say why don't we see blackstone in there? prices are fairly high. the stock market is up a lot, a huge amount over the last couple years. the deals getting done are highly strategic with huge synergies between corporations. the immediate deal, everything you are saying has huge synergies. private equity does not bring synergies. all they really bring his capital. >> and leverage. >> they try to offset the lack of synergy with higher leverage. >> is it just not possible that even if you can get six or seven times leverage on your equity capital, it is not enough? >> is very difficult. that is why even in the process we are running, there's not much
10:18 am
private equity interest as there is strategic. >> they are not showing up. >> clearly they are looking for things but it is hard to compete a deal where two parties have synergies because they have overlapping operations rather than my money is smarter than yours or i can put more money out. the appetite and private equity for europe? for the last three years, whether we are talking about northern or southern europe, pe firms are saying this is the moment. is the moment here for europe? >> we are fairly optimistic about euro. it is the canary in the coal mine in a positive way for europe, real estate. there has been a tremendous flow of money into the market. distressed real estate from banks and other parties. that is the forerunner of broader investment across europe. >> one of the flavors of the month, when it comes to europe, tax inversion. are tax inversion deal something u.n. greenhill want to be involved in? >> yes, we have been and we
10:19 am
would like to be. that is a remarkable future. >> you don't care about the political controversy. >> i'm not sure there is much of a controversy. >> really? >> there are two ways congress can deal with it. to pass a law that says you cannot merge with a foreigner if it causes you to move overseas. that is very difficult. we are an open economy, we buy companies and day by us. it is hard to put up banners between copies. our corporate tax rate is very high. 8eenhill operates in 7 or countries. the highest rate we pay is in the u.s. that gives companies an incentive to try to earn their money to the extent they can overseas where there is a lower rate. >> what is the pipeline for inversion deals look like? people nlot of industries. you have seen mostly in pharmaceuticals, they are across the board. >> where do they work well?
10:20 am
therey can work anywhere, is no industrial limitation. the rule is how much is owned by the foreigner versus the u.s. happened in pharmaceuticals because there are other drivers for that. the r&d pipeline, a salesforce that you can push our products through. right now we have seen a lot of strategic regions and -- a lot of strategic reasons for companies to combine. if valuations stay this high, making it hard for companies find a reason to merge, might tax a marriage as the reason firsfor strategic m&a. >> how are they can get that through? >> the reality is and many of the large transactions, tax is the driver. sooner or later i think we need to reform our corporate tax to
10:21 am
bring it down to a rate. >> hold on. yes, great idea. let's be real. could the u.s. government, they cannot agree on is the sky is blue, really address corporate tax reform? fallenorate taxes have in recent years in places like japan and the u.k. much lower than germany. we have a vision and america that europeans and others tax much higher than we do. it is really the opposite. something will need to be done. you are watching the law of unintended consequences. very high tax rates so we are losing hughes amount of tax revenue overseas. >> great to see you. >> thank you so much. >> ceo of greenhill and company, one of the biggest independent financial advisers on mergers and restructuring. when we come back, lots more. >> some say he is the poster boy
10:22 am
for corporate behavior. i just think he is nasty. american apparel's dov charney fighting to hold onto his job as ceo. i wish he was holding onto his underpants in that video. ♪
10:23 am
10:24 am
10:25 am
>> no aereo decision today but other important rulings just came out. back to the steps of the high court with yang yang. decision today. we are looking to wednesday, thursday, or next monday. the final day of the term. in does a decisions five business-related cases i mentioned. the first was united air regulatory group versus the epa, the epa received a partial win.
10:26 am
the u.s. supreme court has epa's their efforts, the authority to impose permit requirements but only for facilities that are expanding or building. nothing on prior facilities only on one's to be expanded or built. this is a partial win for the epa, they have the authority to create rules. but for the businesses who were concerned that the epa permitting requirements would apply to millions of facilities, we are seeing the court has limited the scope to a few hundred facilities. a partial win on that. a symbolic win, saying the epa's current work is constitutional and within its authority. n,lliburton versus erica joh can shareholders sue as a class. the court has created new , but it iss
10:27 am
upholding the right to sue. >> when we come back, the island of debt. >> puerto rico! ♪
10:28 am
10:29 am
10:30 am
welcome back to "market makers." bloomberg tv is taking you to puerto rico. an island of debt, $70 billion to be exact. going along with double-digit unemployment and energy prices that are double the average rate in the u.s. mainland. i traveled to the u.s. commonwealth to look at what the government there is doing to help. one effort, tax incentives to attract investment from high net worth transplants with high levels of enthusiasm. >> san juan represents a great opportunity for my generation. nick is betting on the
10:31 am
promise of puerto rico. not only making investments on the island, he has moved his office and family from greenwich, connecticut two san juan. >> last year i spent about 10 days or 15 days outside of puerto rico. we are all in, we are not going home on the weekends. >> to attract investors, the government created acts 20 and 2 2, tax exemptions for businesses that export services from puerto rico to outside markets. the individuals who relocate to the islands. the government forecasts that investors will apply for the program to stop >> my phone rings three or four times a week. >> local businesses are welcoming interest and investment. are you seeing company start to move here? >> for sure. in aerospace and in other areas. people comeen more
10:32 am
to puerto rico in the last two years than in a long time. one of the biggest advantages of acts 20 and 22 is not so much how many money is spent, it is putting puerto rico back on the map. isthe new visibility attracting a wide range of investors. from the high-end, john paul, who has not moved to the island but has committed hundreds of millions of dollars to remodel the historic vanderbilt resort. >> he has ambition and he is willing to put his money where his mission is. >> puerto rican investors do not thee competition, capital is too important. >> if we didn't have these laws, they would not be here. they are only bringing incremental benefits to puerto rico. >> what are the options? having real estate development die or go away.
10:33 am
>> we are seeing a lot of entrepreneurs. our people creating jobs and we are really happy with the program. juan, i hads in san a chance to speak with the governor. he told me more about his plans for overcoming the economic headwinds facing puerto rico. everything can be sunny on the island but how are they going to get out from under the debt burden? >> i will be able to reduce the deficit, i am about to improve the first balanced budget in 20 years. i am balancing the budget without firing people. we have been able to reduce the on employment rate very heavily. the crime rate, we are improving. >> how are you doing this? you raise this money, it is going to buy you time.
10:34 am
what are the steps? you have to get out from a big deficit. >> the market we prove that we have proofs it was a runway. now we have to take off. we are doing that in a conference of way. tour is on -- for sure -- booming,s manufacturing is back on its feet. in my termt average was 14%, it was 16% with the previous governor. it is going down. isit is still double what it in the states and you are having a massive migration of people leaving puerto rico to the u.s. how do you stop this? >> it is here like everywhere. if there are no jobs in a high crime rate, people leave. what we can do to stop that, reduce the unemployment rate and enhance security and reduce our
10:35 am
crime rate. we are doing both. >> what kind of companies are you trying to attract? are there certain industries you are talking to now? >> we need to diversify. that is why we are entering very strongly into aerospace, for example. hollywood is here and expanding. hewlett-packard, now with fines up -- now lufthansa. it is a success story. we prove that the jim's a prof -- we prove that the doomsday prophets were wrong. >> if they do not restructure your debt, you could look like argentina. comparing usre with argentina, they stop comparing us with detroit and grace. what we need to do now, we need to lift up and make our economy
10:36 am
take off. what we did was buying time. now we have the runway and we need to and prove tour iism, manufacture, and agriculture. >> do you need to modernize your energy system? your bills are double than what they are in the states. if you are going to have manufacturing, how are you going to do it while the energy bills are so high? >> that is very important but let's put apples to apples. if you compare puerto rico to out of thections continent, puerto rico is the cheapest. if you compare it with hawaii, ustr, even alaska, there are some areas where you pay four times what you pay in puerto rico. but we need to improve. what are we doing, we are at work to release the
10:37 am
environmental impact document. plant. our main power with the san juan power plant to transform that to propane. so we will be able to reduce the energynd reduce price. erik, it sounds good. he is a politician and highly motivated. act 20 and 22, which is supposedly driving hedge fund managers to go down there, it is not happening in droves yet. they tried to do it in the virgin islands for the last 15 years and it has not happened. if they do not bring more dollars to the island, how are they going to get out from under this? they have a big debt offering but who will benefit? high yield investments, john paulson. it is almost heartbreaking.
10:38 am
he is buying defunct projects from local investors. >> only so much one man can do. he is doing some of the right things and trying to create incentives to attract business to puerto rico. he is freezing public worker salaries. he is merging agencies and closing schools. my question is how long is it going to take before the rest of puerto rico realizes what he is the voters,cides, whether they are supportive. he is taking things away from them. >> if you are in the middle class, you are getting out of the country. he's closing schools, public schools are terrible. yes, there is this elite infrastructure being built to attract the outside. at this point, those in the middle and the bottom in that country are suffering. >> i know it. it's not really a country. >> island, territory. if you are trying to pull dollars from new york and bring them to puerto rico, what do you think new york politicians think? schumeryou think chuck
10:39 am
things about john paulson? >> "delighted" is not the word i would use. what a company does when its ceo and founder is implicated in a scandal. that's the problem american apparel is dealing with right now. ♪
10:40 am
10:41 am
10:42 am
>> welcome back to "market makers," i am stephanie ruhle. dov charney is not going away quietly. the american apparel founder and former ceo is fighting his termination. the board fired him after years of sexual harassment allegations along with accusations of misusing funds. let's look at how american apparel is dealing with this crisis. pr expert joining us, he has advised some of the world's highest profile campaigns, including the financial crisis and the gulf oil spill. let's break it down for a moment. we have known that dov is a bit
10:43 am
of a -- >> not even going there. >> unusual, unorthodox. no appropriate words come to my mind. does he need, does that matter? do american apparel customers care that the ceo is naked dancing on the internet? >> i don't think they did care at one point, about 10 or 12 years ago, it was cool. now it is not cool. how has the market in responding? you have a number of things happening. you have the ceo behaving badly. of the last 17 quarters that have not been profitable. you have to find your new market position, how do we compete with other companies who are going after our target audience? of things a number are happening. the board is doing what it needs to do but the question is why did it take so long. >> is that why, because this was dov charney's company.
10:44 am
he created american apparel and identify that market, tapped into that market. maybe there was hope he would be able to reinvent the company in a way that would make it successful? right,ink you are probably. i am not sure the company is a public company needs to be overly concerned about the founding ceo. at the end of the day, a lot has changed since his dorm room at tufts. when the company was out there itng sexually explicit ads, worked for a while but not anymore. the big question has been that their brand has always been a non-sweatshop. that is what has made it stood apart. that is not working when the ceo is using the company as a dating service. >> sex does not sell. >> american apparel is pretty sex. >> we can do a whole section on
10:45 am
those things. >> how does the company reinvent itself? if you were advising american apparel, what would you be telling them? >> first, they have done the right thing here. offer, anhave made an attractive offer to the ceo and by requirement they have given him the 30 days and an option and and out. they expected the litigation to be coming from him no matter what. the story, very successfully. some headlines even use the word as an pervert. they have isolated the ceo without it appearing as coming from them. they have brought in jones-day, a law firm to handle the investigation. handle the dismissal. all of those things in terms of what it is doing now and what it has done leading of the past
10:46 am
year have been very smart. the other two questions going forward, one, why did they take so long? that will be a question, not as brutal if the stock bounces back. and how do they handle competition like forever 21 or h&m and other companies that are starting to move into the market share? they have a brand crisis once they get through the ceo crisis. >> if you were advising dov, would you not say take a bow, be quiet? he's coming off a humiliating pr situation a week ago. wouldn't it be wise as a businessman to start a bow out, take the summer off and revisit the industry in six months? to throw himself right back in when all you need to do is google his name and you will see a video of him naked dancing. >> absolutely. and heisolated himself
10:47 am
has cornered himself. he does not have many options. what third parties or other ceos or former ceos, thought leaders are going to step up and defend him? what people from the financial markets are going to defend him in terms of the performance of the company? he does not really have a lot of defenders here. he is on his own. he will have to let his lawyer, patty glaser, talk to him. she is very high profile who has represented a number of celebrities and business related lawsuits. a strong female lawyer out of los angeles, she can be an effective spokesperson. but he really has been kicked off the island and he has no one to defend him. >> i think if he was asking me i n islandy there is a somewhere he should be spending the summer and getting out of the headlines. richard, thank you for joining us. richard levitt.
10:48 am
>> why we love watching the world cup, if only that last-minute had not been scored against team usa. yesterday's tie against portugal puts america's chances of moving onto the next round. ♪
10:49 am
10:50 am
10:51 am
are watching "market makers" on bloomberg television. i am erik schatzker and this is stephanie ruhle. the chemical compound that has saved soldiers could be in for smartphone, we are talking about kevlar. who createdtist kevlar died last week, she was 90 years old. in 1965, a dupont chemist was looking for a fiver to replace steel in belted tires. aat she came up with is synthetic fiber credited with saving lives. kevlar is five times stronger than steel. bylar could repel bullets
10:52 am
dissipating energy through the fabric. police were970's, using kevlar and bullet-proof vest. in the days before stephanie kwolek died, the one million kevlar vest was sold. the u.s. military replaced its 40-year-old steel helmet with a kevlar one in the 1980's. now it is the standard around the world. play of civilian uses, it is used to make skis and tennis rackets. even in smartphones and sneakers. stephanie kwolek said she never thought her discovery would turn out to be a lifesaver. she admitted she took pride in watching tv reports of soldiers wearing kevlar body armor and saying we invented that. >> one of the most revolutionary materials of the industrial age. kevlar. >> kevlar. there you go. extraordinary story, 90 years old. meantime, a
10:53 am
spectacular header off a brilliant cross by one of the world's best soccer players with -- a historic finish, not if you are team usa. portable -- with the usa tied with portugal, 2-2 in the world cup. germany also tight over the weekend, america still stands a good chance of advancing to the rest -- advancing to the next round. what is the number? 2%.he number is if we are just talking about what happened in the final minute. there is only a 2% chance that the u.s. was not going to win that game with one minute to go. >> we do this, minute by minute. >> if you look at their match analysis data, you can track again throughout the entire course of it happening in real-time. with one minutes ago, it was a 2% chance. that is why this can get tricky.
10:54 am
anything can happen. sometimes you do not want to watch the game. if you have just read in the newspaper this morning they tied 2-2 you would have felt great. >> you would not have seen the drama. >> it looks horrible. >> it does not look horrible, it was beautiful. >> it feels horrible. >> it was a beautiful goal. the other number, what are the chances america moves on into the second round? >> 77%. >> you are doing everything possible to take the sexy out of this game. >> it soccer. >> the world cup in brazil. athleticism and passion at its finest. your response is 77%. womp womp. >> i handle the numbers. >> amazing. 77% because germany has got a much better chance of getting in. >> america plays germany. >> if they tie, they are both
10:55 am
in. fifa is slightly corrupt. if you want to think that they might agree to do something, you never know. they need to tie. the other game -- >> journey type -- germany tied ghana, the u.s. tied portugal. you cannot wait to see if portugal-ghana to find out what they do. if they tie, they are both out. they will play at the same time thursday at noon. watch both at the same time to see what's going to happen. >> why watch it at a sports bar when you can watch in front of a bloomberg terminal and look at statistics? >> i don't know how to answer that. >> thank you for removing the sexy. a 25% chance of advancing out of this stage two weeks ago. the fact that they are 77% now, compared to 25% at the beginning
10:56 am
of the tournament -- >> doesn't that make you feel good? >> that fired me up. >> tripled their chances. >> tripled their chances! how do you feel about this data? >> i'm a data junkie, what can i say. data are great. a little sexy and a little data, i'm in a good place. >> write-in the middle of the two of us. "market makers" will be back in just a moment. >> if you are born to be wild, listen. >> no!. electricand-new harley motorcycle. right here where we are sitting. >> electric harley davidson and a hog does not seem on brand. we will be back. ♪
10:57 am
10:58 am
10:59 am
11:00 am
>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> winning the war with twitter. we will see how the rebels in iraq are using the media to further their cause. >> love to drink wine but do not know anything about it? there is an app for that. >> get your motors running. we have the new harley motors here.-davidson motorcycle this engine is electric. welcome back. i am stephanie ruhle. >> i am erik schatzker.
11:01 am
we will start with the news feed. top business stories around the world. larry ellison is trying to jumpstart growth that oracle after a disappointing result. they have agreed to by micros systems, 45 $.3 billion. orcle sales have declined gained less than 5%. the supreme court has given a partial victory to halliburton. company has imposed new requirements on shareholders to want to ring class-action lawsuits. halliburton had hoped to abolish lawsuits altogether. justices refused to go that far. ai is close to settling allegations. will pleadain't guilty and pay as much as $19 billion. the terms have not been finalized. >> secretary of state john kerry is in baghdad today.
11:02 am
and topith maliki leaders representing the studious and kurds. this comes as they seize more territory in iraq's northwest. i would like to bring in phil mattingly. give us the latest. >> john kerry just held a press conference in baghdad. he had meetings with prime minister maliki and the top sunni leader. his point was this. this is the time. hinges on of iraq what the government leaders do in the next couple weeks. the primeow is that minister has said that the parliament will be convened by an addedot puts emphasis on what u.s. officials are doing behind the scenes. they're working with groups on the kurdish side to have more of a unifying impact when the
11:03 am
government is formed. u.s. officials have been very clear that there's not a lot of support on their side. no indication that the prime minister is going to step down. they will try to form some kind of political dynamic. if you does not step down, try to limit his power. >> what is john kerry's role h ere? onto put the public pressure the prime minister and see if the u.s. can push diplomatic fight the things. he also said that the advisors announced last week and started to clear the country. they are picking up intelligence assets. that is happening. they also want a push on the diplomatic front. we are hearing that there are sunni leaders who are not aligned with isil at all. they are not willing to come in and help out as long as maliki
11:04 am
is in power. kerry is trying to come in and balance the sense of the situation, and environment, where sunnis can have a more incorporated role and kurds can have more of an incorporated role. >> thank you for giving us the latest. >> in the meantime, radicals and militants and terrorists -- they are pretty good at social media. that is one of the more curious aspects of this battle for iraq. how effectively they use twitter to build a brand and spread a message. a group released an android app. there is a social media how-to for business -- gary, does it surprise you as much as its presence everyone else, how clever these guys are? now what you would expect, really. maybe would now. >> i fully expect that.
11:05 am
why wouldn't they? this is a tool that is overthrowing governments in that region. why would you not use it on the offense instead of the defense? the good guys, the bad guys, how this defintees them. >> does this put established governments on the defense when it comes to social media? they cannot just throw something out there. >> it becomes a playing field. you can either play offense or defense in life. this says this is a game. you either play one way or the other. you cannot just have it the way you want. businesses love it. then when people jump on npn their product, they are sad. to use itments love for propaganda. the other side has that opportunity as well. >> this is just another example
11:06 am
of how individual voices today can use social media to have a bigger platform than they had before. >> yes. there's also another variable. first, the civilians use it to overthrow the government. now, recruits are starting to use it. when they recruit on twitter -- that is data that we can look at. our ability to look at that -- there is always another move. ps they decided, if grou decide to play in this field, they have to remember that anybody can want that. now tothe ability right go and look at everything go person they are recruiting publicly in a domain. thank you for me a data set to do something with. >> what are the roles of the game? what do you do if this is not clearly? it is an offense of move.
11:07 am
they're trying to enhance their brand. how do you respond? it is not coke versus pepsi. it is militants versus the government. >> look at the accounts and what they are engaging with. look at the affiliations. step in and talk with the iss. see who their friends are. you're just having a friend. head. also, how the civilians work for it now that twitter has been played out, they are it and i ran to communicate and organize. the government is paying attention to twitter. >> does twitter have a responsibility here to police this? they have not been successful yet. >> twitter thinks of itself as a utility. >> is there a question that kerry cannot answer? company's the phone responsibility to get into the gun laws? these are the tools.
11:08 am
is it their responsibility to govern? that is why they want to stay away from it. >> is it a tool for free speech? >> in this country, of course. that is why they have to stay out of it. yeah, i think it is. >> you say that this makes perfect sense. they know what they're doing. are there are other mediums that you are looking at? are their political agendas that you think -- they are doing it right? >> i think people -- the people who have played social media right are people like myself, self promoters. we understand the power of it. now you see brands and networks jumping in. >> where is the line between self-promotion and authenticity? everything that gets promoted to me via twitter, i immediately
11:09 am
block. >> that is the best answer for you. the audience -- >> audience decides. >> everyone says the kardashians are crap -- millions of people are watching it. journalism is being attacked. it is so sad. real a journalism is not being listedned to. drink kool-aid on thursdays, that is what they will read. if you promote too much and people start tuning allowed, you lose. the audience. the market is always right. do not fight the market. >> if i am not mistaken, you're here for the hour. gary, the ceo of media. >> it is my favorite. bon appetit. if you want a table at that hot new restaurant, restaurant apps are fighting to help you out.
11:10 am
>> and harley davidson goes green? it is electric. we will have it right here. you're watching "market makers>' ." we are on your smart phone, tablet, and bloomberg.com.
11:11 am
11:12 am
11:13 am
>> welcome back for a very special morning. ande back with gary, a ceo author of "jabs, jabs, jabs, right hook." now we're talking about how he is getting into the restaurant reservation business. >> why is it a very special morning here? >> because you are here. we're are not just rolling out headlines. ok, you know what? it is not. the challenge is on. now it is your turn to
11:14 am
deliver. opentable is what everyone is out there using. why are you here disrupting it? thisam disrupting it with because we think that opentable is great and serves a purpose. if you want to make a reservation 30 days out or even five days out. at we are looking at marketplace where we are looking at restaurants were you cannot get on opentable. uber and world of other products, we wanted on our time. if you want to go out to dinner somewhere nice and go somewhere you could not get into -- >> you are and uber investor. you understand the business model. editor came up with the core idea. if you want to disrupt
11:15 am
restaurants and you love that world, i added some flavors from the learning stuff that app. >> how does it work differently? >> it does not work that differently. you paid for it. you can do reservations, were opentable is free. it is $10 and $50 a head. >> for every restoration? >> right. i think that is underpriced. nobody is going to pay for something they can get otherwise. or if they do not value it. so i think that people will value access and time. you cannot get into the places that were listed. does not take reservations. people waited 45 minutes to one hour. i would rather use cash.
11:16 am
nothing offense may more than calling eight customer -- restaurant and a maître d'says do you want 5:00 or 10:30? how do you get the restaurants to agree to this? >> 10 years in that industry. they are getting money out of it. >> of course. they are the only industry where they turn away 200 people a day. it is costing them money. it is ludicrous. opentable charges a restaurant a fee. the thought that they run a business -- think about this. you own a business where hundreds of people want to come in. you're getting charged to seat them versus making a premium. the phone is now an extension of us. it allows us to use technology
11:17 am
to crush inefficiencies. >> that makes a ton of sense. what about the restaurants? one thing is that they can be pretty ephemeral. the restaurant is hot today, not hot tomorrow. in a world where your restaurant does not necessarily have power to endure -- opentable is your friend. resy is not. >> opentable is your friend, but it is a media platform. >> you will not always be turning 200 people away. you may be now. >> you are correct. to that point, we are not trying to solve the problem. we may have some things up our sleeve that we are not ready to talk about for that problem. rate this again, your 100% correct. the resy team is not trying to solve a problem. opentable is not doing anything final. >> opentable does not work for
11:18 am
me. i want to eat in certain restaurants and know that my table is not getting turned over in an hour. how do i build a relationship with restaurants so i can get the kind of service i want? > on the back end is a crm system. if you are buying wine, that is a data point. that becomes one of the ways. these technologies do not change the sole intent and operations of a restaurant. if you want to build a relationship with a restaurant for -- >> what is the revenue split? >> something we're are not willing to disclose at this point. >> look at him smiling. guess what? >> i always answer everything. i am finally, after 10 years, learning how to say that. this is a special day for me. >> all right. >> when we come back, we will talk about the 1% problem's.
11:19 am
want you're at dinner, you need something to drink. the app that can turn you into an instant expert on wine. >> you are watching "market makers."
11:20 am
11:21 am
11:22 am
>> welcome back. y clippers may have another reason to raise their glass and even the bottle. there is a new feature added to image app, real-time recognition. i want to bring in the ceo of a company and gary vaynerchuk is still with us. >> he knows a few things about wine. >> he invests in this company. >> you hold your phone up to a bottle of wine. i will demonstrate here. push a button. then you can either make a note about the wine or if you are in
11:23 am
a supermarket -- it will tell you about the wine then and there. if you want to buy it, push a button. andf i take a picture of it i am in a restaurant, can it tell me here is what it would cost in gary's wine store? and how much i am getting jacked? >> it will tell you how much you can buy. you can buy for $30 and it is $80 and a restaurant, you have been jacked. >> that does affect what you think about it. >> it has tasting notes. we have very cool people like gary. areow many street bottles listed. >> 2.5 million. is the mostsure it complete database that has ever existed. >> who put together this data? >> we put it together. >> 2.5 million bottles of wine?
11:24 am
>> yes. we are good at data. >> that is a very labor-intensive process. >> you and i would go about it one by one. these guys are nerds. they know how to do it. >> they do not taste this wine? >> we crowd sourced it. t.u taste it, gary tastes i >> i can do that on cellar tracker. >> hopefully we will have their data at some point. our community is larger than tracker. cellar >> why do you love this business? >> i come from the world. what it is really about, what i care about -- why anyone should care is the ability to take a picture of a label. get practical with this. in two seconds, you can get feedback from the world.
11:25 am
that has always been the problem. to wine shops and there's a lot of options and you are crippled. you do not always want to trust the shop owner because there's no agenda. you do not know. >> they may have a pallet that is different from yours. >> that is also true. >> when you have a whole community, you can find the 30 or 40 people who have a pallet similar to yourself. it is intriguing information in real-time. really taking that photo. >> how can the scale be -- >> we're looking at other products. like beer -- we have a lot of requests. >> that is way more consistent, easier. >> is much easier than mine. lists and restaurants are very hard. when you get handed the dictionary, unless you are an expert, it is debilitating for a lot of people. on the wine must
11:26 am
tell you almost nothing about the line. our job is to bring all of the data that tells you anything about the wine and put it in an easily digestible format. >> anybody watching thosea second someone gets knowledge, the second they have knowledge, they become a jerk. do not order the 89. . >> what does that make you? >> funny. i went in the other direction and tapped into that zone. i knew that i did not want to use my knowledge to hurt people's feelings. >> i do not know what oakes takestes like. >> vanilla. get paid?you >> you can buy wine through the app. this is what we are working on.
11:27 am
we have market data for the wine industry. we have more than anyone else. >> congratulations. we will drink to that. gary will be back after the break. >> lots more coming, stick around. ♪
11:28 am
11:29 am
11:30 am
>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome back. if you live north of new york city and westchester county of southern connecticut, you know these names. there is a small chain of grocery stores that are like meccas. it started as a small milk delivery business. now it is worth more than $3 million. rd is here to tell us how to build a brand. and we are still with gary vaynerchuk.
11:31 am
stew, in your opinion, what is the secret of stew leonards ? >> we started as a family business. we have what another $1 million. in retail. we are competitors in a way. >> to be honest, i want to fight. >> that is -- i met you -- >> get a piece of beef to slap gary. >> ok. [laughter] >> this thing, my gosh. >> that is renter's favor that is a ribeye steak. >> how much does that cost? >> $50. >> people love it, but it is clearly an exclusive grocery store. not a lot of people go to the stop & shop to buy a $50 slice of beef. >> we also have strip
11:32 am
steaks on sale. we have something for everybody. if you want the best thick cut state, that is what you get. >> how does it work? >> we started as a dairy. my dad delivered every day. we just sort of else a store up where you make everything fresh. we get fresh fish and corn from farmers. we cut our own meat. we do mozzarella, roast coffee. >> it is a unique place. it is like a maze. you can only go in one direction. in the typical kroger or safeway or fairway, there are 30,000 items. you have --? >> 2000. >> how is that a successful model? >> we are mainly the perimeter of a grocery store.
11:33 am
the inside is where those thousands of items show up. we try to focus on the best selling fresh items. etchup, a few a k barbecue sauces. we will not go crazy with packaged product. >> is this a place that generations go to -- the success is built on word-of-mouth. does it need a social media traffic? >> of course. actuallyeeds to do is why they work as an outsider. it has soul. stew leonards has true dna. it is authentic. they need a social media strategy because everyone does. social media does not need to market in the year that we live in. it is not a debate. when they execute through that channel, they cannot just be promotion. i cannot just be $4.99 steaks. they need to talk to people and
11:34 am
help them with recipes. they need to be authentic. >> do you need to be price competitive? costco have that at $50, could be down the block at 24.99. >> it would not be that big of a price difference. >> costco is a great competitor. we have one next to us in yonkers. they do fantastic and we do fantastic. you have to buy a big pack of meat if you go to costco. you can buy ads, family sized portion. >> prices one of the variables. the notion that price is -- it is just one of the variables. >> what do you do to keep people coming back? to make it different than renovate the brand and key people from directing? -- drifting? >> we have costco and whole food, fresh market.
11:35 am
>> i am launching a food market to compete with him. >> gary is really neat with a low social media. i am an old-school retailer. we build big displays and create excitement and do demos. we have animation. we try to make it fun for the kids. i say there are two customers. one is under four feet and one is over four feet. we really want to make it fun. said that your company set a record for sales per square foot? what are they like today. >> probably around a couple thousand dollars. >> how does that compare to whole foods or publix? fresh market? it is multiples. $3,470 -- you cannot do that year in, year out. that is twice as good as whole
11:36 am
foods. >> we make it fun with 6 million visitors coming to the norwalk store. it is like italy in new york. turn thers could experience into a best buy experience. a place to go for a destination. an experience, but not the place they go to buy. especially if you have a costco next-door. >> you're bringing up the wrong competitors. yes, it could become a competitive nature. someone will have to offer that high quality food at those prices, delivered to your home. costco is not doing that. instacart and some of the new technology -- will have to stew innovate our very the next 20 or 30 years. i worry about that in the future. we do have to get better in social media. to reach out to the younger people. it is free.
11:37 am
how much pressure do you feel to expand? >> we want to be over the next 15 years a billion dollar company. we have a plan to do that. we have a next generation of our -- >> you better go slow. fairway try to do it fast. >> the wheels can come off. you can only grow as fast as your people. 88% upper management team has been hired from within. we do not want to change that. we have never had a layoff. we have people who are 20 or 30 years. we have a great bench. we want to grow and offer them opportunities in the future. $1 billion over 15 years is not that fast. it is a new store every other year. >> that is the advantage of a private company. you can control the gain. >> with social media, i worry about how much of our food in
11:38 am
the future people may want delivered to their home. >> a lot. time is what people care about. >> people still want to come in. we have live lobsters on ice. they like to point and say i want that one. they want to take something and buy it. >> you are being romantic. that is a bookstore owner said. there is some level of that. once people are revved up to understand how much time they save -- you do way more than anybody else actually selling. >> gary, that is different from a bookstore. i do not want to taste a book. you can see the pages. with food, i do want to taste it. >> do i have to tell you about fresh direct? >> we have zones that we try to create. sight, which is having exciting stuff like innovation. smell, hit them with the smell. >> you know what is exciting? saving 27 minutes of your day. >> what will you do with it? >> use it with family.
11:39 am
>> what if the family wants to go food shopping. >> i think you do that extremely well. >> i know there are competitors out there like fresh direct that deliver to your house. i am hoping -- it could be the wrong bed, but i hope to create fun and exciting place for families to come and shop. >> it is a mix of the two. >> i love going to the grocery store. i do. every sunday. >> my tweets are 5000 right now. >> we will help you get them up. >> something about how many you have. >> we better go to commercial. >> good to see you. [indiscernible] gary, it is about depth, not with. coming up, we are going whole hog. hurley davidson has a new electric motorcycle and it is right here. ♪
11:40 am
11:41 am
11:42 am
11:43 am
>> you have wanted to see it. the electric harley davidson. here it is. >> when we come back, we will be talking to harley davidson. the ceo of harley davidson. stick around. >> pretty cool. and quiet. >> until you're out on the road. . sounds like a jet engine. ♪
11:44 am
11:45 am
11:46 am
>> the hog is going electric. i am talking about harley davidson. the iconic motorcycle company right here -- we have the first
11:47 am
battery-powered bike. here to talk about it is their ceo, keith e. wandell. i guess we have to ask why make an electric bike? ofcertainly, we have a lot them on the road. we have been in that this is for a lot of years. we think about the future and we s and about urban rider writing in cities. it makes perfect sense. >> someone would buy this instead of a vespa? >> certainly, this is an alternative. it is really a nimble ride. it is a great ride. particularly for urban areas. there's a lot of traffic. >> is the goal to bring in a new demographic? a traditionalbout harley davidson customer, they want the fast, the full, the loud hog.
11:48 am
are you trying to change the taste of your existing customer? >> there is no question. we love our traditional customers. they are who made our company what it is today. there is a whole other demographic. riders,riders, female other riders that we are trying to appeal to. with the electric bike, both other bikes we are developing. >> so much of what makes harley is the brand. people identify with the brand. whether they look at this live wire bike or some of the newer bikes you are making that are quite different from a traditional hog -- don't you run the risk of diluting the brand or alienating the folks who still make up the very vast majority of your sales? >> we have to be very careful about the brand because of what it stands for. it is the look, sound, and feel
11:49 am
of the harley davidson. the styling, how it is styled, the look, the sound. if you go out on the highway in this bike and ride it -- there is a very distinct sound to it. it is like a jet engine. we were very careful in how we designed the electrification to make that sound. >> one problem. you can get on the highway, but you cannot go very far. this has a range of 53 miles? today with53 miles this current technology. >> it will not even take us -- >> over the next couple of years, we intend to continue to improve. >> when will people be able to buy this? >> we have not said when this will be ready for retail sales. the rest of this year and next year will be spent in north america and europe doing customer rides and getting feedback to get it right. >> how do you get it right?
11:50 am
harley-davidson has been around for over 100 years. it has not been a smooth ride. in the mid-1980's, you're facing bankruptcy. how have you made it through? >> it is the brand and the customer. the thing that is unique about this company is that our customer is really owned the brand. that is something very personal. it represents personal freedom. all of our customers around the world -- so with that kind of support, we have kind of continue to make changes and reinvent ourselves. this is the most recent reinvention of our company. >> what stands between you and making an expansion of the range, making this bike more appealing to a broader number of people? >> the battery technology is certainly part of it. --ave not personally i think that folks are certainly investigating how do we work with folks like tesla and others to make sure that we have leading-edge technology and to make the best bike possible? do things with
11:51 am
harley davidson that other ceos have been unwilling to do, like make bikes outside the united states. howell is that going to work for your clientele? >> especially given what an all-american brand it is. >> usa is so some anonymous with what harley is. >> we have been a great company for 111 years. our job is to make sure that it will be a good company for the next 111 years. that is what it is all about. the world is changing. here's is a great demand for our products around the world. people want to participate in the brand. and so we just need to make sure that we continue to do the right things and ring the right products and make sure that we have the right customer experience. our job is to figure out how do we change the company for the future? >> where is your second biggest market? >> europe is a big market.
11:52 am
japan has been a big market for us for several years. south america is getting bigger. >> what are the keys of tapping into the chinese market? >> the chinese market and indian market are both growing markets for us. we have several new dealerships. >> we have to leave it there. the motorcycle is getting out of here. ♪
11:53 am
11:54 am
>> perfect day to come back. we are rolling out of here on an electric harley.
11:55 am
we are going to party tomorrow. we have the ceo of polaroid joining us. more tablets these days. we will speak to hardy. for now, we are making our way. thank you for joining us. keith e. wandell, co harley davidson. >> time for on the markets. here's julie hyman. >> it is not safe to ride a motorcycle with stephanie role. stocks appear to be stalling. near all-time highs. we are seeing little movement, despite merger activity. existing sales off of manufacturing numbers are not giving much of a boost. joining me with insight and a look at where the markets may be headed is jim struger with mkm holdings. we hit that record on friday. now things are stalling out. there are some interesting activity with the ft wide. quiet monday. a
11:56 am
there. equity markets remain impressive. from a volatility perspective, it has been suppressed. around 14, up to almost 46 days. compare that to the 23 day average. there have been some geopolitical flareups on the world. an impressive performance across the board. our message continues to be that implied volatility makes a lot of sense to use listed options strategically. to your point about spies -- justin the etf, opening of this week's trading, some protective positions put on. 190 rises very quickly. almost $3 million. similar in july. a quick spread in the q's. that is the nasdaq 100.
11:57 am
those are some of the biggest traits we have seen go up. pretty quiet open to the week. >> even on the surface, it seems like there is -- there are some people who are putting on those protective vests. maybe we will see a short term pull back. >> it is a very positive environment. as we have set a number of times, implied volatility stays low for another four or 4.5 years. that implies a good environment for stocks. unless the laws of nature are rescinded, we will see a pullback. we believe we are due one. we're right in-line with them putting on those protective positions. >> another way that people are taking a protection is buying gold. we may see two positive quarters, which we have not seen in a while. we had a dismal year last year. we are heading into indian wedding season. do we continue to see that momentum there?
11:58 am
the other thing has been what is going on in iraq. >> we do. indian wedding season is further in the fall. we're into the seasonality of buying the gold. jewelry is made -- whether that drives the seasonality, i don't know. there is a big old conference in denver that people focus on. the fact is that from june to september, every successive month, gold performs better historically, going back to the 1960's. typically, that pattern begins in june. that is something we want to be aware of. gold has moved up over 5% in the last couple of weeks. maybe comes in a little bit with gold miners, both on the hedging front and the seasonal trade front. we like giving a long exposure in gdx and gld. we want to go out to september and capture the entire period. to september out
11:59 am
30. there is an expiration that covers the entire month. we went to buy 130 or 140 cost spread. you create a 621 or so pay off. very nice payoff. gdx, with implied volatility near its low, we provide some calls. 27.5 strike calls. >> we will watch that gold trade to see how it works out. thank you so much. we will be on the market again in 30 minutes "money clip" is next. ♪ . .
12:00 pm
>> welcome to "money clip," where we tie together the stories, interviews, and videos in business news. i am adam johnson. puerto rico trying to stay afloat with $70 million over its head on the balance sheet. a lot of money. in media -- aol, clear channel, sharing war stories. and the founder of american apparel strikes back after his ouster. and a higher ed revolution. no pencil or paper required. this one,

32 Views

info Stream Only

Uploaded by TV Archive on